The World Bank has lowered its 2012 GDP growth forecast for Russia to 3.5 percent, from the 3.8 precent it was predicting in June, the World Bank said in its latest Russian Economic Report.

The 3.5 percent growth is the same as the World Bank forecast back in March.

The World Bank also lowered its 2013 growth forecast for Russia, to 3.6 percent from 4.2 percent.

"Just at a time when Russia's output level exceeded the 2008 pre-crisis highs, the economy appears to be setting on the course of low growth. Despite external headwinds, Russia's economy performed well in the first half of 2012. However, the economy is slowing down in the second half of 2012 due to rising inflation, weakening domestic demand and sluggish external demand," the World Bank said in its latest report.

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"The Russian economy had a good first half of the year, with strong domestic demand as the main driver of growth. Key economic indicators were near or at record levels: the current account surplus stayed high and the Central Bank of Russia added to its reserves, helping to bolster market confidence. While many countries in Europe were struggling with large public debt and high fiscal deficits, Russia's public debt was no more than 10 percent of GDP and the fiscal balance was in surplus. Inflation and unemployment rates both declined to the lowest level in two decades. As people's purchasing power improved and unemployment fell, fewer people were in poverty than at any time since the beginning of the economic transition in early 1990s," the report says.

"However, a significant share of these accomplishments has been tied to high oil prices. Boosted by supply constraints rather than strong global demand, the price of Urals averaged US$113.7 per barrel in the first half of 2012, just slightly below Brent. High oil prices have translated into strong export receipts, buoyant fiscal revenues, and fast credit expansion."

"Despite a modest rise in the oil prices, we project growth in Russia to decline from 4.3 percent in 2011 to 3.5 percent in 2012, and stay at 3.6 percent in 2013. Compared to our June forecast published in the Global Economic Prospects, this represents a downward revision of 0.4 percentage points in 2012 and 0.5 percentage points in 2013," the report says.